Rationalization and Monopolies The writer of this article raises an
issue of great importance, to which we referred in our article " Petrol and Monopoly " last week. We do not, however, altogether share his misgivings with regard to rationalization.—En. Spectator.] THE latest and popular panacea for the solution of our industrial problems and the return of our prosperity, is called " rationalization." It seems to have the support of prominent leaders in most branches of our industries and commerce including banks. At first the ordinary person is, therefore, afraid to express any doubt as to the merits claimed for rationalization, but when he reflects- on what happened in the .industrial world soon after the -termination of the Great War, he cannot have implicit confidence in the infallibility even of eminent business men. We then witnessed an orgy of inflation -of the value of capital and the formation of combines, but for two or three years past we have seen many prominent firms going through a devastating • process of reconstruction as it is called, one of the latest being the firm of .Sir W. G. Armstrong Whitworth Sr. Co., Ltd.
The movement which is now known as rationalization was at first called by the more expressive term of " Big Business," but it now seems clear that the real aim of the movement is not merely larger firms instead of small rums, whose capacity was too restricted for their particular work, but the establishment of monopolies in every branch of our industries in which it is possible to do so. There is an extensive propaganda in favour of the move- ment, and with the assistance of the herd instinct there is a boom in rationalization ; with all deference to the listinguished people who are supporting it one has some doubt as to the merits of uncontrolled monopolies.
This country developed its enormous trade under unre- stricted competition, but apparently under the. guise of rationalization a drastic reaction is being engineered for the purpose of exterminating competition. • The diScovery has been made all of a sudden that competition is wasteful, that much expenditure is incurred by tiaderS in their efforts to secure business, and that prices are unduly reduced, thus forcing wages down. It also appears to be accepted by labour that competition tends to keep wages so low that the worker is often unable to earn enough to 'enable him to obtain an adequate supply of the essentials of a meagre subsistence. It is represented that rationalization implies co-operation between capital and labour, but it is not stated on what terms they are to work together. Do the employers expect to get larger profits through a monopoly, and to share these with their employees as they may mutually.` agree? Naturally the owners may wish to preserve their inflated capital, and similarly the workers may expect higher wages when competition is extinct; but these objects can only be attained at the expense of the community.
We are told that the employers are only following the example of other countries, and that it is only by con- centration and unification of business that they will be able to effect the utmost economy and efficiency, and to compete successfully against their foreign rivals. It is obscure how they are to effect such economies as will enable them to get higher profits, pay higher wages, and charge loWer prices for their productions. The home consumer may reasonably have misgivings as to how they can do this without taking more from him. I am well aware that many people dislike competition, as it compels them to be continuously exerting themselves to stimUlate the .demands and to meet the requirements of the corn_ munity. But surely there is a great advantage rather than a calamity in competition as a means. of spurring those who serve the people to do their best ; and we must not ignore the potent striving of almost every one to get the highest possible remuneration for their goods or services.
There are certain industries which can be best conducted on a large scale, and I suggest no objection to "big busi- ness " where it is the most suitable method. But there is a limit to the size of any business which can be most efficiently managed, as the mental and physical powers of the ablest person are strictly circumscribed, and the ability of a board of directors is never higher than that of its ablest member. The boom of rationalization will; no doubt, have to run its course, but- while it is doing so all monopolies should be under effective public control in order that the interests of the community may be protected.
The present writer would point out especially that if competition in any particular industry is eliminated it will be absolutely impossible to ascertain-whether the price Charged for any article by the monopolist finn is reasonable or not. Any examination of its books would only disclose the cost of the commodity as produced by them, which cosi . might be inflated by _excessive capital, excessive staff, inefficient management, obsolete machinery, - defective organization, or any other shortcoming. What the lowest cost of an article might be could 'only be determined by genuine competition over a period. A monopolist firm would have practically no inducement to spend money on improvements or to effect economies in working, and it is certainly a startling idea that the industries of the country should be entirely in the hands of monopolistic oligarchies, and that such would be advantageous to the community asa whole. There seems no good reason' why such combinations should, without question, be permitted to remove all possible stimulus to efficiency and all restrie- t tion on their power to charge whatever- they will. What heinous sin is there in industrial competition ? Of course, it restricts the power of the autocrats who have secured -.the. control of federations of capitalists and federations . of workers to impose their will on the community.. . The danger is surely lest rationalization be indeed a synonym for menopolization. If we do not prevent monopolies in our essential industries we should at least control them, for, no industry should be in the absolute control of any man or body of men, however capable he or they may be. Many clever people are avaricious, unscrupulous, • unjust, or otherwise unfit for the sole control of an Mulct- - taking affecting -the. vital interests of 'the people. It is also important. to keep in' view that the personnel of the Management of anyundertaking may change at Any time, and that there cannot, therefore, be any guarantee that any management will continue to be capable.
There are, of course, precedents for suggesting that industrial monopolies should be under effective control, for railways and - certain other concerns are at present and have always been under statutory restrictions 'relating to such matters as the amount of capital which they niay raise, and the charges which they may exact for their services and the amalgamations and agreements into which they may enter. Railway companies were never more than partial monopolists, since there was always mach competition between themselves as well as by sea, and they are now faced' with competition by road all Over the country.
There is no restriction on the amount of capital which a joint stock company may raise or the charges which it may exact. When the first Companiei Act was passed in 1862, it was certainly never contemplated that any joint stock company would secure an abselute monopoly Of any industry or that there should be such huge com- binatiens of capital as we have to-day. It is only recently that they have come into existence and raised the problem of how the community is to be protected against extortion and domination by them. They cannot reasonably object to less restrictions being placed on them than on the railway companies and certain other companies. There certainly should be restrictions on joint stock companieS as to the amount of capital which they may raise without the sanction of Parliament or some State Department, and they shOuld aLso" require to obtain the sanction of the same authority to any amalgamations, acquisition of other cOmpanies, agreements as to regulation of prices or any public services, or any arrangement tending to eliminate competition. In the ease of monopolies at least, the Government should have the right of making investigation into their charges for their goods or services.
W. ANDREW. •
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